The U.S. Republican Party has now officially endorsed the idea that a commission should study “possible ways to set a fixed value for the dollar.” This seems a sign that the idea of a hardened monetary policy has re-entered the mainstream of discussion. Bravo.
Bank of England
A little more than a half year ago the Bank of England issued its Financial Stability Paper No. 13, reviewing the global financial crisis from the point of view of the “international monetary and financial system.” The authors, Oliver Bush, Katie Farrant, and Michelle Wright, concluded that the IMFS now in place, the one “in which countries are free to choose whether to fix or float their exchange rate” vis-à-vis other countries’ currencies to suit their own domestic agendas, is a failure. It has “performed poorly against each of its three objectives at least compared with the Bretton Woods system,” that is, as compared with the form in which the gold standard was restored after World War II, a system that lasted until the presidency of Richard Nixon.
The “three objectives” of an IMFS, as these authors see it, are: internal balance (each country’s pursuit of non-inflationary economic growth); allocative efficiency (the ability of capital flows to respond to price signals); and financial stability (the avoidance of crises and their costs). As they see it, the Bretton Woods system sacrificed some allocative efficiency to serve the other two goals. Stronger or more direct sorts of gold ties tend to give up internal balance to achieve allocative efficiency and financial stability. Soft money, “today’s system,” fails all three tests.
With all due respect to those three authors, it doesn’t take great acuity to recognize by now that the idea of fiat currencies floating/sinking against one another all the time, since Nixon’s originating fiat, hasn’t been history’s greatest idea. It has one benefit. It sometimes does assist the quick-witted in their pursuit of alpha. Much of what is called “global macro” in the hedge fund world might be better described as monetary-policy arbitrage.
The creation of the euro itself, and of the European Exchange Rate Mechanism before that, was in large part a response to the risks created by the post-gold, post-Nixon system. Consider the rich opportunity this ERM in turn offered to George Soros, who knew how to play it. But policy, if it is sensible, isn’t created to make life easy for arbs.
George Gilder, whose new book publishes today, is one of the original pillars of Supply Side economics. As stated by Discovery Institute, which he co-founded, “Mr. Gilder pioneered the formulation of supply-side economics when he served as Chairman of the Lehrman Institute’s Economic Roundtable, as Program Director for the Manhattan Institute….”
He was the living writer most quoted by President Reagan. And he is back with his most brilliant work yet — one of potentially explosive importance if taken to heart by our political and policy thought leaders. It is a radical guide, with surprising insights on almost every page, to the creation of a new era of vibrant prosperity.
As reviewer Paul Brodsky, a professional investor in New York City, perceptively notes,
"Lewis Lehrman is one of a very small group of contemporary gold advocates able to successfully bridge the gap separating practical conservative intellectualism from fleeting, half-baked idealism. His CV lists great success across many fields including education (degrees and teaching fellowships from Yale and Harvard); industry (past president of Rite Aid); politics (narrow loser to Mario Cuomo in the 1982 New York governor’s race); finance, (past Morgan Stanley managing director); private sector entrepreneur (founder, L. E. Lehrman & Company); public sector advocate (founder, Lehrman Institute); historian (author, Lincoln at Peoria: The Turning Point); and recognized philanthropist (awarded the National Humanities Medal by George W. Bush in an Oval Office ceremony). ... Only someone erudite and elegant in demeanor could hope to pull it off . In an irreconcilably over-leveraged world where irritated bond vigilantes question economic sustainability and angry Tea Partiers protest the immorality of it all, Lehrman’s views are considered and his convictions carry weight. He brings gravitas to his cause, and he does so from within as a member of the club."
Before the Fed: JP Morgan Summons the Bank Presidents
"Finally, on the night of Sunday, November 2, Morgan summoned the presidents of the major New York banks to his new library, at the corner of Madison Avenue and Thirty-sixth Street, an Italian Renaissance-style palace he had built next door to his house to showcase his collection of rare books, manuscripts, and other artwork. Its marble floors, frescoed ceilings, walls lined with tapestries and triple-tiered bookcases of Circasian walnut, crammed full of rare Bibles and illuminated medieval manuscripts, made it an incongruous setting for a meeting of the banking establishment. Once the moneymen had gathered, Morgan had the great ornamental bronze doors to the library locked and refused to let anyone leave until all had collectively agreed to commit a further $25 million to the rescue fund."
— Liaquat Ahamed, Lords of Finance (Penguin Books, 2009, p. 54)
Lately we have been engulfed by headlines reporting financial turmoil on every continent, in almost every nation, large and small. The commissars of central planning who so marred the history of the 20th century have been replaced by central banks in the 21st. In Cyprus, the new leadership now dares to confiscate citizens’ wealth with a one-time tax of up to 60 percent on bank deposits above 100,000 euros. Self-interested prime ministers blame continental monetary policies for instigating the currency wars that they themselves surreptitiously carry on.
Constitution.org provides an extensive and thoughtful Memorandum of Law by Larry Becraft, Esq., of Huntsville, Alabama, on Article I, Section 10, clause 1 of the US Constitution.
Sir William Blackstone courtesy of Wikipedia
One of many interesting matters the Memorandum treats is Blackstone's Commentaries, a book that was a fixture in the...
The value of the yuan has been slowly rising. The value of the Japanese yen has been sharply falling. Abenomics is attempting to reflate the Japanese economic – slowly, slowly. “Japan is back!” Prime Minister Shinzo Abe tells the Japanese.
Coming back isn’t easy. The Financial Times’ Jonathan Soble has noted...